Commissioner of Income-tax Vs. Gujarat State Financial Corporation - Court Judgment

SooperKanoon Citationsooperkanoon.com/733870
SubjectDirect Taxation
CourtGujarat High Court
Decided OnSep-01-1993
Case NumberIncome-tax Reference Nos. 75 and 75A to 75C of 1983
Judge G.T. Nanavati and; Y.B. Bhatt, JJ.
Reported in[1994]210ITR698(Guj)
ActsIncome Tax Act, 1961 - Sections 2, 29, 30, 31, 32, 33, 34, 35, 36, 36(1), 37, 38, 39, 40, 41, 42 and 43A
AppellantCommissioner of Income-tax
RespondentGujarat State Financial Corporation
Appellant Advocate B.J. Shelat, Adv.
Respondent Advocate K.H. Kaji, Adv.
Excerpt:
- - gujarat state finance corporation [1992]196itr822(guj) .in that case, it has been held as under (headnote) :the opening part of section 2 of the income-tax act, 1961, which contains various definitions clearly provides that, unless the context otherwise requires, different words and expressions will have the meanings given in that section.g.t. nanavati, j.1. even though the tribunal has made only one reference, they are numbered as four references as they pertain to four different assessment years and really arise out of four orders passed in four separate appeals before the tribunal. question no. 1 referred to this court is common in all the references and question no. 2 pertains to the assessment years 1975-76 and 1976-77. they are as under : '(1) whether, on the facts and in the circumstances of the case, the tribunal was right in law in coming to the conclusion that the relief under section 36(1)(viii) of the income-tax act, 1961, should be worked out. for all the years on the basis of 40 per cent. of the total income before deduction (a) under section 36(1)(viii) and (b) under chapter vi-a (2) whether, on the facts and in the circumstances of the case, the tribunal was right in law in coming to the conclusion that the sums of rs. 61,186 for the assessment year 1975-76 and rs. 34,736 for the assessment year 1976-77 in respect of the guest house expenditure were wholly and exclusively for the purpose of the business and as such allowable under section 37 of the income-tax act, 1961 ?' 2. so far as question no. 1 is concerned, it is now covered by a decision of this court in cit v. gujarat state finance corporation : [1992]196itr822(guj) . in that case, it has been held as under (headnote) : 'the opening part of section 2 of the income-tax act, 1961, which contains various definitions clearly provides that, unless the context otherwise requires, different words and expressions will have the meanings given in that section. it is not possible to read the expression 'total income' used in section 36(1)(viii) to mean total income computed in accordance with the provisions contained in sections 30 to 43, as provided in section 29, so as also to take into account deductions admissible under section 36(1)(viii). since section 36(1)(viii) itself provides that the total income for the purpose of the said provision is total income before the deductions under chapter vi-a, it would mean that, for the purpose of working out deduction under that provision, the total income would be the total income before deductions (1) under chapter vi-a, and (2) under that provision (section 36(1)(viii)). what was implicit in section 36(1)(viii) has now been made explicit by the subsequent amendment of the said clause (viii) with effect from april 1, 1985.' 3. following that decision, we answer the question in the affirmative as deduction under section 36(1)(viii) has to be worked out by applying the proper percentage to the total income computed before deductions under section 36(1)(viii) and chapter vi-a. 4. as regards question no. 2, what is required to be emphasised is that the controversy between the revenue and the assessee was whether the expenditure in question was entertainment expenditure or business expenditure. it has been found as a matter of fact that it was not an entertainment expenditure. therefore, the point arising for our consideration stands concluded by a decision of the supreme court in cit v. sirpur paper mills ltd. : [1978]112itr776(sc) . we, therefore, hold that the tribunal was right in coming to the conclusion that the expenditure in question was wholly and exclusively for the purpose of business of the assessee and as such, allowable under section 37 of the income-tax act, 1961. 5. both the questions are answered in the affirmative, that is, against the revenue and in favour of the assessee. references are disposed of accordingly. no order as to costs in each one of them.
Judgment:

G.T. Nanavati, J.

1. Even though the Tribunal has made only one reference, they are numbered as four references as they pertain to four different assessment years and really arise out of four orders passed in four separate appeals before the Tribunal. Question No. 1 referred to this court is common in all the references and question No. 2 pertains to the assessment years 1975-76 and 1976-77. They are as under :

'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the relief under section 36(1)(viii) of the Income-tax Act, 1961, should be worked out. for all the years on the basis of 40 per cent. of the total income before deduction (a) under section 36(1)(viii) and (b) under Chapter VI-A

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the sums of Rs. 61,186 for the assessment year 1975-76 and Rs. 34,736 for the assessment year 1976-77 in respect of the guest house expenditure were wholly and exclusively for the purpose of the business and as such allowable under section 37 of the Income-tax Act, 1961 ?'

2. So far as question No. 1 is concerned, it is now covered by a decision of this court in CIT v. Gujarat State Finance Corporation : [1992]196ITR822(Guj) . In that case, it has been held as under (headnote) :

'The opening part of section 2 of the Income-tax Act, 1961, which contains various definitions clearly provides that, unless the context otherwise requires, different words and expressions will have the meanings given in that section. It is not possible to read the expression 'total income' used in section 36(1)(viii) to mean total income computed in accordance with the provisions contained in sections 30 to 43, as provided in section 29, so as also to take into account deductions admissible under section 36(1)(viii). Since section 36(1)(viii) itself provides that the total income for the purpose of the said provision is total income before the deductions under Chapter VI-A, it would mean that, for the purpose of working out deduction under that provision, the total income would be the total income before deductions (1) under Chapter VI-A, and (2) under that provision (section 36(1)(viii)). What was implicit in section 36(1)(viii) has now been made explicit by the subsequent amendment of the said clause (viii) with effect from April 1, 1985.'

3. Following that decision, we answer the question in the affirmative as deduction under section 36(1)(viii) has to be worked out by applying the proper percentage to the total income computed before deductions under section 36(1)(viii) and Chapter VI-A.

4. As regards question No. 2, what is required to be emphasised is that the controversy between the Revenue and the assessee was whether the expenditure in question was entertainment expenditure or business expenditure. It has been found as a matter of fact that it was not an entertainment expenditure. Therefore, the point arising for our consideration stands concluded by a decision of the Supreme Court in CIT v. Sirpur Paper Mills Ltd. : [1978]112ITR776(SC) . We, therefore, hold that the Tribunal was right in coming to the conclusion that the expenditure in question was wholly and exclusively for the purpose of business of the assessee and as such, allowable under section 37 of the Income-tax Act, 1961.

5. Both the questions are answered in the affirmative, that is, against the Revenue and in favour of the assessee. References are disposed of accordingly. No order as to costs in each one of them.